![Oil rig in the sea](/en-uk/-/media/research/global/news-analysis/featured-image/2021/03/energy4.jpg)
- Crude oil outlook: Path of least resistance to the upside amid geopolitical risks
- WTI hits resistance at $87, but downside could be limited
- Friday’s large rally indication of things to come?
Following the 5% rise on Friday, crude oil prices gave back some of those gains on Monday. However, this could be a temporary respite before oil prices rise again.
Why have oil prices weakened?
As there was no further escalation in the Middle East crisis over the weekend, it is likely that traders who had established long speculative positions last week to take advantage of another potential gap, decided to move out of the way. This is one plausible explanation behind the oil price weakness observed on Monday.
Path of least resistance to the upside
But the path of least resistance is to the upside following that big upsurge, so don’t be surprised if the bullish trend were to resume on Tuesday. There is always the risk that the developments in the Middle East could draw in large oil-exporting nations, which may hurt oil production and thereby cause prices to rise. The big worry is if Iran gets involved. Iran has said that if Gaza operations continue there would be regional escalation in the conflict.
Until such a time that the situation de-escalates, oil prices should continue to find support on any short-term dips. Even then, the OPEC’s ongoing supply cuts means prices are unlikely to fall significantly anyway.
Crude oil outlook: WTI technical analysis
Source: TradingView.com
For WTI, the key support area to watch is around $84.10 to $85.45. This is the blue shaded area on my chart. Here, WTI had previously found strong resistance until Friday’s breakout. Once resistance, this area could very well turn into support, leading to another move higher. But if oil fails to hold support here, however, then we could be talking about low $80s again.
On the upside, resistance is seen in the region between $87.15 and $87.95, the previous support range. A break above this area could pave the way for a move towards September’s high at $94.63 and $95.00 next.
So, WTI is kind of stuck between two key technical ranges here and depending on the direction of the break, we could well see a sharp continuation in the direction of the break.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
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